The around Rs 20,000-crore deal could help the national insurer realise its long-cherished dream of owning a bank.

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Mumbai: The insurance regulator has not set any timeline for Life Insurance Corporation (LIC) to bring down its stake in IDBI Bank from the present 51 percent holding to the law mandated under-15 percent, a senior Irdai official said Thursday.

In fact, Irda feels a time-line for reducing its stake in IDBI Bank has to be decided by the LIC management itself as a regualtor mandated time-line can impact stock prices.

On Monday, LIC had announced completion of acquisition of 51 percent controlling stake in the near-crippled IDBI Bank, which makes it the majority shareholder of the bank.

On January 21, IDBI Bank had received Rs 5,030 crore from LIC and on December 28, 2018 LIC had pumped in Rs 14,500 crore capital into the bank as part of its takeover.

The around Rs 20,000-crore deal could help the national insurer realise its long-cherished dream of owning a bank as many other insurers do across the world and almost all the large banks in the country do with their life and general insurance ventures.

It can be noted that following LIC's takeover, rating agency Moody's Wednesday had upgraded IDBI Bank's rating by two notches to 'Ba2' citing improved solvency of the bank following significant capital infusion and also revised the outlook to positive from under-watch category.

At present, the permissible limit for an insurer to hold stake in any listed entity is 15 percent. But LIC with special dispensation from Irdai holds more than this in some state-run banks like Corporation Bank.

"We have not prescribed (a timeline for LIC to pare down its stake in IDBI Bank to 15 percent from 51 percent) for the simple reason that if we prescribe a timeframe that every year LIC dilutes 10 percent stake then will it not impact the stock valuation?" Irdai member (life) Nilesh Sathe told reporters at a risk management event here Thursday.

Stating that a timeline for reducing its stake in IDBI Bank has to be decided by the LIC management, he said "the stake can come down even tomorrow if LIC finds the right price. As an investor, you always look at how to make profit from an investment."

But he was soon to assert that LIC as an investor in IDBI Bank will have to reduce the stake over a period of time as it has done in other investments where the investment exceeded the prescribed regulatory cap.

He also said there is no conflict of interest in LIC investing in IDBI Bank which also has a life insurance joint venture in IDBI-Federal Life Insurance.

"Has LIC bought stake or increased stake in IDBI Federal? No. The stake buying in the bank does not mean that LIC is the promoter of IDBI Federal," Sathe said, adding the Irdai law only prevents a promoter from floating/running/ investing in two insurance entities.

"If LIC wants to start another insurance company then we will have objections. But in this case we don't have to step in," he argued.

While addressing the event, he said the risks in insurance and banking are different. "Fundamentally, insurance risks are idiosyncratic and for the most part is independent of economic cycles. Large insurers are well diversified, geographically and also in terms of business. In contrast, bank-specific risks tend to be highly co-related with economic cycles," he said.

Addressing the same event, Reserve Bank principal chief general manager (risk monitoring department) Rabi Mishra said the basic objective of the risk management should be to identify and quantify the risks being undertaken and eventually price them on commercial lines.

He said while there is no doubt about the benefits accruing from digitasation, the benefits will not be reaped properly if the risks are not addressed properly.

Mishra said one of the main risks financial sector players face today comes from the cyber world.